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Monthly Archives: February 2016

In the Senate HELP Committee’s confirmation hearing for Acting Education Secretary John B. King Jr, Senator Elizabeth Warren asked why the defrauded students of the now-bankrupt Corinthian Colleges have not received the debt relief they’ve been promised, despite the fact that the Department of Education has both the authority and the legal obligation to grant it.

Corinthian Colleges, Inc. was a for-profit school that received billions and billions in federal student loan money before its bankruptcy. But instead of the opportunities students were seeking Corinthian further impoverished them, cheating them of the education they were promised while burdening them with millions in outstanding debt.

Senator Elizabeth Warren: I want to raise one more issue. The students who were cheated by Corinthian College. Now, before Corinthian College collapsed, this for-profit college sucked down billions and billions of dollars in federal student loan aid by roping in students with false and misleading information and then saddling them with debt that is going to be impossible to repay. It was outright fraud, and in response the Department made a lot of promises to Corinthian’s victims. Last April, the Department promised to give Corinthian students “the relief they are entitled to under federal law.” Two months later, the Department announced they would “find ways to fast track relief based on legal findings for large groups of students” and there would be “no need for students to make individual showing that they were affected by the school’s fraud.” The Department also estimated last summer that about 40,000 former Corinthian students would be eligible for this so called fast track relief. Now, that’s out of hundreds of thousands of total Corinthian student that the Department acknowledged could be eligible for relief. It is now eight months later, and just 1,300 of those 40,000 fast track students have received relief. And I want to know what the plan is here to actually deliver on the promises that the Department has made. It seems to me, Dr. King, that the Department is moving painfully slowly while students who got cheated are struggling under debts that they were conned into taking on. Time is running out for these students, so I want to know, how do you plan to live up to the Department’s promises and actually ensure that each and every student who was defrauded receives debt relief now? Not years from now, but now?

Acting Secretary John King: I appreciate the question. So a few things to know. The special Master Joe Smith is working diligently with a team and we are adding capacity to that team to add to existing claims…

Sen. Warren: Can I just stop you right there, Dr. King, because this is part of what’s bothering me. I don’t understand why this takes so long. This isn’t hard, what we’re trying to do here. Students are waiting, their credit is getting worse and worse, the interest is accumulating on these loans, the process needs to move faster. And I don’t get why it doesn’t move faster. We know they’ve been defrauded!

Sec. King: We’re trying to make it move faster. I can say a promising note is that $115 million has gone to students either through borrower defense or through close school discharge. We are trying to group claims so that we can respond to them as quickly as possible. We are in the process of negotiating rulemaking on new borrower defense rules going forward that will make it easier for the department to efficiently group claims.

Sen. Warren: That’s going to be 2017.

Sec. King: So the challenge has been that the legal requirement, as you know, is for a demonstration that there was a clear violation of state law. We have students in a variety of states so we are working through those. On campuses where we have a clear finding, and these is true in the Heald and Everest cases, where we have a clear finding at the state level we have been able to group claims or we are in the process of grouping claims. But you are right, we need to make the process move faster and we intend to.

Sen. Warren: I just really want to push on this we potentially have hundreds of thousands of students who have been cheated here. You promised fast track to 40,000 students…That was three-quarters of a year ago, nearly, two-thirds of a year ago, and we’ve only gotten about 1,300 people through it. You know, I just want to remind us that Congress gave the Secretary of Education broad authority to cancel the loans of students who attend colleges that broke the law. I hope if you are confirmed you will use that authority to ensure the students get every dime of relief that they deserve, without making them jump through a bunch of unnecessary hoops. They’ve already been hit hard enough. This is the time for the Department of Education to step up and be on their side.

Sec. King: Yes, I’m committed to protect the interests of borrowers and also to do what we can through the enforcement unit and the gainful employment regulations to make sure we do not have a repeat of Corinthian, to the extent we can avoid it.

Sen. Warren: And that’s powerfully important. Thanks for sitting through two rounds of questions on this stuff.

**In June 2014, the Department said “about 40,000 borrowers” were impacted by the Heald enforcement action. The Second Special Master Report noted that only 1,312 Heald students have received relief. In November, the Department announced that 85,000 former Everest students were affected by their joint enforcement action with the California Attorney General. Thus, this 1% of affected borrowers figure vastly underestimates the population, since it only includes Corinthian students covered by the two enforcement actions.

In a speech on the Senate floor on February 3rd, Senator Elizabeth Warren described America’s criminal justice system as “rigged” in favor of big corporations and the wealthy and powerful. The Senator also condemned attempts in the House to pass H.R. 766, a bill that makes it harder to the Department of Justice to investigate and prosecute financial crimes.

Mr. President, across the street at the Supreme Court, four simple words are engraved on the face of the building: Equal Justice Under Law. That’s supposed to be the basic premise of our legal system: that our laws are just, and that everyone – no matter how rich or how powerful or how well-connected – will be held equally accountable if they break those laws.

But that’s not the America we live in. It’s not equal justice when a kid gets thrown in jail for stealing a car, while a CEO gets a huge raise when his company steals billions. It’s not equal justice when someone hooked on opioids gets locked up for buying pills on the street, but bank executives get off scot-free for laundering nearly a billion dollars of drug cartel money.

We have one set of laws on the books, but there are really two legal systems. One legal system is for big corporations, for the wealthy and the powerful. In this legal system, government officials fret about unintended consequences if they’re too tough. In this legal system, instead of demanding actual punishment for breaking the law, the government regularly accepts token fines and phony promises to do better next time. In this legal system, even after huge companies plead guilty to felonies, law enforcement officials are so timid that they don’t even bring charges against individuals who work there. That’s one system.

The second legal system is for everyone else. In this second system, whoever breaks the law can be held accountable. Government enforcement isn’t timid here – it’s aggressive, consequences be damned. Just ask the families of Sandra Bland, Freddie Gray, and Michael Brown about how aggressive they are. In this legal system, the government locks up people up for decades, ruining lives over minor drug crimes, because that’s what the law demands.

Yes, there are two legal systems – one for the rich and powerful and one for everyone else. Continue reading →

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